Preexisting Conditions and Group Health Insurance

Preexisting conditions, once a dreaded policy exclusion, can now be a manageable part of your continuing group health insurance coverage even when you change or lose your job. But you need to understand the rules and use them to your advantage.



The Way It Was

Before 1997, people were faced with a significant loss of coverage when changing jobs and group health plans. One problem was preexisting conditions. Preexisting conditions were generally considered to be any medical conditions for which an individual (as well as his or her dependents) received medical advice, diagnosis, care, or treatment before that individual enrolled in a new health plan, even if it was years ago. The new group health plan could – and often did – deny coverage for such conditions.



Just how serious was such an exclusion? Very serious. You could be denied coverage for just about anything for which you had been previously treated, ranging from problems like eczema or kidney stones to serious, life-threatening conditions like cancer, diabetes, HIV, and heart disease. Such exclusions in a group health policy could result in a considerable or even an intolerable drain on an individual’s financial resources.



These exclusions often resulted in a socio-economic phenomenon known as “job lock.” This was the reluctance of some people to leave their current jobs for new, more advantageous employment because their new group health plan might not cover preexisting conditions.



HIPAA to the Rescue

The Health Insurance & Portability Act of 1996, or HIPAA, was designed, in part, to deal with the preexisting condition problem. It is a huge, complex law dealing with a lot of issues. We will focus on provisions affecting employer-provided group health insurance and preexisting conditions.



Let’s look at changing jobs and moving from one group health plan to another, a fairly common occurrence today in our mobile society.



Under HIPAA, preexisting condition exclusions must now be limited to those conditions treated within six months prior to a change in group health plans. No more looking back one, two, three or more years. Next, the exclusion period for covering such preexisting conditions is limited to a maximum of 12 months. It can be shorter. However, the time you were covered by your previous group health plan will apply toward the maximum exclusion period of your new one. The same is true for dependents covered by your old group health plan. When you leave your job, your former employer must provide you with a certificate of creditable coverage stating how long you (and any dependents) were covered by its group health plan.



An example will show how this works. Pat was covered by the group health plan at ABC Company for 12 months before taking a new job at XYZ Company which has a 12 month exclusion period for preexisting conditions. Pat’s new group health coverage at XYZ, however, will cover any preexisting conditions immediately because Pat’s previous 12 month coverage at ABC is applied toward the 12 month exclusion period and, in effect, cancels it. Had Pat been covered for only 8 months at ABC Company before moving on to XYZ, the exclusion period for any of Pat’s preexisting condition would be 4 months (12 minus 8).



The HIPAA rules apply to all employer-provided group health plans unless there has been a break of 63 days or more in a person’s health insurance coverage. If such a break occurs, an employee will face the maximum exclusion period for any preexisting conditions when starting a new job.



Note that there may be a 30 to 90 day delay before a new employee is eligible to apply for group coverage. This “waiting period” does not count toward the 63-day break in coverage. Its purpose is to allow employers and insurers to avoid the expense and paperwork of enrolling employees who turn out to be “short termers” and who leave after just a few days or weeks. Nonetheless, a new employee can be without group health coverage for up to 90 days due to a waiting period requirement. This could be a serious problem for someone undergoing expensive treatments or taking costly drugs, such as an HIV patient, for example.



Consolidated Omnibus Budget Reconciliation Act

To provide coverage during this waiting period, a new employee can take advantage of COBRA, an acronym for the federal law that allows individuals to continue their old group health coverage for up to 18 months or even longer in some cases. The individual must pay the entire cost of the coverage plus a 2% administration fee. This can run to over $200 a month for a single person, but is much cheaper and probably provides better coverage than an interim individual health policy.



COBRA can also be used to provide coverage for those who have lost or quit their jobs, have not yet found new employment and who therefore need continuing health insurance to avoid a 63-day break in coverage, as well as to meet their medical bills.



Finally, be aware that HIPAA does not guarantee that you will receive the same coverage under a new group health plan that you did under your old one. That is not what “portability” means. Your new plan may have different deductibles and co-payment amounts. It may limit the doctors you can see or happen to exclude coverage of certain conditions, such as pregnancy or HIV, that were covered under your old plan. If so, the preexisting condition provisions of HIPAA will not apply to those conditions excluded under your new one. In that case, you may want to extend COBRA coverage for as long as possible to fill gaps in your new group coverage.





Planning Considerations

In this era of frequent job changes, downsizing and early retirement, the loss of group health insurance could be catastrophic, especially if you suffer from a chronic or recurring condition. If you are thinking of changing jobs or you have lost your job, take the time to plan how you will maintain your health insurance coverage. Talk to the benefits administrator at your place of employment.



If that isn’t practical or is impossible because of the circumstances surrounding your leaving, check with an independent insurance consultant. Or you can log on to a web site such as www.insure.com that provides information about HIPAA, COBRA and ways to meet your health insurance needs.



You can also take advantage of alternative group health insurance sources. For gays and lesbians, if your companion’s group policy allows coverage for same-sex partners you may be able to enroll in his or her plan. If you belong to a large association or union, it may provide group health insurance to its members.



So with careful planning, you can make sure there are few or no gaps in your group health insurance coverage.